Article No. 85

Customer Psychology Findings, by James Larsen, Ph.D.

The Dirty House Problem

New research reveals a striking improvement in certain judgments if they are delayed.

Consider these situations: a Realtor showing a dirty
house, a car dealer selling a model that Consumer Reports
claims has serious deficiencies, and a middle manager
presenting a proposal to executives that has serious,
previously unrecognized flaws.

What do they have in common?

The house, car, and proposal have good and poor features;
the poor features are serious enough to spoil the sale; and
the person doing the selling has a vested interest in closing
the sale or winning approval of the proposal.

So, should these people press for a decision in spite of
the flaws?

The surprising answer to this question is "no." In this
situation it is better to direct attention away from making a
decision, and away from even forming a judgment, and allow a
week to pass. After a week ask the person to recall the
positive and negative attributes (don't supply them), next,
ask for a judgment, and then try to reach an agreement.

Following this formula allows a newly discovered bias,
called the
positive reference point bias,
to work for you. Pressing for an immediate sale causes it to
work against you. Here's why:

People are moderately positive and optimistic, and this
tendency influences their judgments and memory. The dirty
house shown by the Realtor will be remembered as markedly
cleaner a week later, but it will seem much dirtier than it
actually is as people walk through the house. The actual
dirt competes with a person's reference point for dirtiness;
since this is moderately positive, as the memory of the dirt
fades, this reference point replaces it. But people don't
realize they're recalling their positive reference points
rather than the actual dirt, so they form a biased opinion.
The same process leads us to remember vacations as much more
enjoyable than we actually experience them.

Yoav Ganzah, of Columbia University, and David Mazursky,
of Hebrew University of Jerusalem, conducted a series of
experiments exploring this reference point bias and made two
discoveries that will help business people make use of it.

First, they discovered the bias only works if the product
has a mixture of good and poor features. If the product is
uniformly good or poor, the bias will not improve judgments
by waiting a week.

Second, they discovered the bias only works if judgments
are not made when first examining the product. If, after a week's
delay, people merely recall judgments made when first
examining the product, then the positive bias will not be experienced.
But if they haven't formed a judgment, and are asked to
recall product features, then their reference points will
replace the worst features while they'll believe they're
actually remembering these negative features. So their
product estimates will be higher and judgments based on them
will be much more positive than immediate judgments. The
series of experiments Ganzach and Mazursky conducted
demonstrated exactly this.

Ganzach and Mazursky invite anyone hoping to influence
judgments who finds himself/herself in this situation to
follow the formula they discovered, and they believe some
people may already be using it. They believe positive
reference point biases explain the success of a new selling
technique currently gaining popularity. This technique
places the salesperson in the role of a consultant who points
out negative features. Customers are discouraged from
forming an immediate judgment and the longer they delay, the
more likely it becomes that positive reference points will
replace memories of actual negative product features.

Ganzach and Mazursky also wish those whose products and
services have recently been hit with a negative review to pay
attention. Positive reference point biases are working for
your benefit in your customers' minds, and negative
information will be remembered much more positively with the
passage of time and the failing of memories, so take heart.